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Jane Kelsey: Tobacco Industry Will Use Offshore Courts

Media Release: Professor Jane Kelsey
Friday 20 April 2012

Tobacco Industry Will Use Offshore Courts to Attack Plain Packaging Laws

“The tobacco industry will use every legal avenue it can to stop New Zealand introducing plain packaging laws”, predicts University of Auckland Professor Jane Kelsey, who is just completing a report on the impact of trade and investment agreements on New Zealand’s smokefree policy.

“This is a battle between life and death for New Zealanders and life and death for the tobacco industry. The industry will fight it all the way, backed by its bottomless treasury.”

Investment chapters in free trade agreements allow the companies themselves to sue the government directly in private offshore tribunals on the grounds that new policies seriously affect the value or profitability of their investments.

Philip Morris is currently using such agreements to challenge strict new tobacco laws of Australian and Uruguay through complex chains of subsidiaries.

New Zealand has different agreements, but it is just as vulnerable to a dispute. The proposed Trans-Pacific Partnership Agreement would give those powers to US investors, providing a more direct pathway for the tobacco companies to sue.

“It doesn’t really matter to Big Tobacco whether they have a solid legal argument. If they succeed, the government could have to pay hundreds of millions of dollars damages and/or withdraw the law. “

“But these disputes are just as much about harassment and having a ‘chilling’ effect on government decisions, while providing a deterrent to other countries, as they are about the law,” Professor Kelsey observed.

In addition, the government would be likely to face legal action at the World Trade Organisation – where it likes to be viewed as an exemplary free trade citizen.

Proposals for consultation on the policy starting later in the year might allow the National Government to buy time, and defer making a decision, perhaps permanently, if the industry can make life uncomfortable enough.

Information about Legal Challenges to Australia’s plain packaging law

The Australian government is being sued from three directions:

1. The tobacco companies have brought a constitutional challenge claiming the law constitutes a ‘taking’ of their private property, being trademarks. The hearing started in the Australian High Court this week.
2. Philip Morris Asia is suing the Australian government under a bilateral investment treaty it signed with Hong Kong in 1993. Again, the tobacco giant is claiming expropriation of its intellectual property, and a breach of fair and equitable treatment because the government changed the law on the investor.
3. A dispute in the World Trade Organization is being initiated by Ukraine and Honduras alleging breaches of intellectual property rules and the agreement on technical barriers to trade that applies to product labelling. New Zealand has asked and been allowed to join as a third party to that dispute along with several other countries. There is speculation that this dispute is being funded by the tobacco industry.

Professor Jane Kelsey
Associate Dean (Research)
School of Law
University of Auckland


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